Salary Pay Laws in California

By Dan Ketchum - Updated August 28, 2018
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In 2017, the U.S. Federal Reserve reported that Californians made a median household income of $67,739, making it the ninth wealthiest state in the union – a fact that's not hard to believe, considering that the state by itself has the sixth largest economy on the entire planet. For salaried workers, many of the state's progressive, employee-friendly laws help keep that money in the bank (and plenty of those laws extend to non-salaried West Coast workers, too).

In fact, the laws for salary pay in California are in such a constant state of evolution that Los Angeles attorney Michelle Lee Flores of Cozen O'Connor in Los Angeles tells the Society for Human Resource Management that "one of the biggest challenges for California employers is complying with ever-changing workplace rules." Ever-changing and challenging as they may be, plenty of those rules take aim right at salary issues, from those that arise in the hiring process to those that pop up after a 40-hour work week.

Equal Pay Laws

Sure, most states lay down the law in terms of overtime pay requirements, break time rights and limits on working days – and that law is backed on the national level by the historical protections written down in the federal Fair Labor Standards Act passed by Franklin D. Roosevelt's administration in 1938. But laws for salary pay in California are uniquely forward-thinking, particularly in their aim to protect equal pay. Many of these requirements can be found in California Senate Bill 358, which took effect after unanimous approval on New Year's Day in 2016. June D. Bell of the Society for Human Resource Management calls these fair pay laws "the toughest in the nation."

Colloquially known as the Equal Pay Act, this legislation guarantees that employers cannot pay one employee less than any other employee on the basis on race, ethnicity or gender so long as those two employees are engaged in substantially similar work. In this case, "substantially similar" means that the jobs are similar in terms of required credentials, education or skill levels as well as in their required physical effort, working conditions and responsibility levels. Pay differences are, on the other hand, acceptable on the basis of concretely provable systems that reward seniority, merit or quality and quantity of work wholly apart from race, sex or ethnicity.

As an even greater measure to reduce racial and ethnic salary discrimination and to reduce the gender pay gap, the state passed new legislation in the form of California Labor Code Section 432.3 on January 1, 2018. These laws work for employees by prohibiting potential employers from asking job applicants about their current salary, past salaries or benefits, whether the question comes up in written or oral form – and employers aren't allowed to get sneaky by obtaining that salary info through other sources, such as recruiters or agents, either. If the employer is somehow already privy to a potential employee's current salary or benefit information, it's against the law to use that information to decide whether to offer a job or to determine said job's salary. So, if you live in California, don't worry about including the question, "What do you make currently?" on your mock job interview exercises – state law's already got you covered.

As is the case with most laws, though, there are some exceptions to these new rules. Existing laws like the state's Public Records Act, the California Fair Pay Act and the federal Freedom of Information Act do actually allow some salary history info to be disclosed. As the Public Records Act itself says, "The gross salary and benefits of high-level state and local officials are a matter of public record," but on a lower level, "civil service employees have an expectation of privacy in individually identifiable salary information." Of course, if Californians are also totally free to offer their current salary situation or history voluntarily without any employer prodding, but that still doesn't mean an employer can use that info as an excuse to pay less.

Employers are safe to ask about salary expectations, and they may reach out to previous employers to verify prior salary after they have already made an offer to the applicant. Still, some jurisdictions, like San Francisco, require written permission from the applicant before previous employers can disclose salary history to a prospective employer. On the flip side, the law also requires employers to inform applicants of a "pay scale" (a basic salary range) upon what it calls "reasonable request."

Employees with equal pay complaints in the Golden State can reach out to the state's Division of Labor Standards Enforcement at the California Labor Commissioner's Office for further information and help.

California Overtime Laws

Like many states, the Best Coast's state legislation works in tandem with federal laws to ensure employees the right to receive overtime pay. In California, those who work more than 40 hours in a single week or eight hours in a work day are entitled to overtime pay. Likewise, Californians enjoy overtime on the first eight hours of work they do on the seventh consecutive day of any work week. The overtime rate in the state is the typical time-and-a-half standard, or your regular pay rate multiplied by 1.5. The law covers non-exempted employees of 18 years of age or older, as well as minor employees (aged 16 or 17) who are not required by law to attend school.

But, what if you don't make an hourly rate? Do salaried employees get paid overtime in California? Yes they do, under most circumstances, whether they're working at a production office in Hollywood or running a human resources department in Silicon Valley. For Californians on salaried pay, the regular pay rate is determined by dividing the weekly salary by the number of hours worked (in the case of overtime pay, that'd be 40 hours). For overtime pay, that figure is multiplied by 1.5, just as it is for employees paid hourly. You can also divide annual salary by 52 to arrive at a weekly salary figure. If an employee earns two or more varying rates from the same employer during a work week, the regular rate is the weighted average calculated by dividing total earnings (including extras) by total hours.

Typical of generous California workplace laws, additional compensation such as productivity bonuses and shift differentials must be included in overtime pay at time-and-half as well. Even better, when employees work for more than 12 hours in a single day or more than eight hours on the seventh consecutive day of a work week, they're entitled to a double-time rate of twice their regular pay.

California Overtime Exemptions

Federal law exempts from overtime laws many categories of laborers not considered "employees." Some groups aren't legally guaranteed overtime pay per the nationwide Fair Labor Standards Act, including salaried executives, independent contractors, criminal investigators, fishermen, some newspaper employees, seasonal recreational workers, outside salespeople, some computer specialists, volunteers and some others.

California's own laws add quite a few more overtime exemptions to the federal pile, which apply whether the worker in question is hourly or salaried. The long list includes actors, film projectionists and taxi drivers. In the agriculture industry that thrives in Northern California, sheepherders and irrigators are exempt, as are commercial fishing crew members. More examples of California overtime exemptions include some airline employees, school bus drivers, people employed by their immediate nuclear family, many employees covered by collective bargaining agreements and employees who make more than half of their earnings from commissions. The definition of exempt or non-exempt can get pretty rocky in California, just as it does elsewhere – the California Chamber of Commerce recommends using the "strict duties test," in which employees are considered exempt if more than 50 percent of their time on the clock is spent performing exempted job activities.

Speaking of exemptions, California also has a salary threshold for overtime pay; full-time employees making at least twice the state's minimum wage on a fixed monthly salary are not covered by the legal umbrella of overtime laws. Because California's minimum wage is scheduled to increase yearly through 2022 (from $11 in 2018 to $15 in 2022), that threshold will change with it, rising each time that the minimum wage rises. For instance, the 2018 threshold for California overtime exemptions is a monthly salary of $3,813.33, which will jump to $4,160 in 2019, $4,506.67 in 2020, $4,853.33 in 2021 and $5,200 in 2022. Annually, that comes out to $45,760 for 2018, $49,920 for 2019, $54,080 for 2020, $58,240 for 2021 and $62,400 for 2022. These rates will vary in certain California cities and counties that have higher minimum wages than the state standard, including 2018 rates of $13.75 per hour in Berkeley, $12.00 in Los Angeles and San Jose, $12.86 in Oakland, $11.50 in San Diego and $14.00 in San Francisco.

While non-exempt employees on a salary cannot legally earn less than the state minimum wage and are fully covered by all of California's wage and hour laws, exempted employees – both salaried and hourly – are not protected by wage or salary laws.

More to Know

While workplace and salary laws in California are often as refreshing as a Pacific ocean breeze for employees, that doesn't mean that employers have few rights. Employers have every right to reduce an employee's salary, for example, as long as the reduction occurs for a lawful reason (i.e., the reason can't defy existing salary legislation and can't occur as an act of retaliation) and does not reduce the salary to a level below that of minimum wage. This is true for non-exempt employees and exempt employees alike.

State law in California requires overtime to be paid whether or not it is authorized in official company literature or salary guidelines. That said, employers are legally allowed to discipline employees who go against clear company policy by working overtime without authorization, in cases in which the company requires such permission. Employers may also require employees to work overtime and, in general, may choose to discipline the employee (within the bounds of the law) if the employee refuses to work scheduled overtime. On the employee end, workers may choose to voluntarily work on the seventh day of a work week, too. According to Labor Code Section 204, overtime wages in California must be paid on the payroll period following the relevant overtime hours, and not later. Californians employed in the state are not allowed to waive their rights to overtime pay, per Labor Code Section 1194 – though it remains unclear why anyone would want to do so in the first place.

About the Author

As a freelance writer and small business owner with a decade of experience, Dan has contributed legal- and finance-oriented content to diverse sources including Chron, Fortune, Zacks.com, Motley Fool and MSN Money, among others.

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